Indexing wins. Now what?

The point everyone in the active/passive debate appears to be missing, is that the issue at hand is not whether active is better than passive. That has been settled. The real issue at hand is nothing more than the basic calculus of every investment choice we have to confront. Is what I’m gaining from the decision I’m about to make more valuable and important to me than what I’m losing? If I do this, what's the most likely worst-case outcome — and could I live with it if it happens?

Like moths we are instinctively drawn to the light of what's working. But light can blind as well as inform. The demise of indexing, if and when it actualizes, will not be the result of some internal weakness or flaw in its infrastructure; it will be because we overused it, abused it and expected far too much from it.

Excerpted from my latest column at ThinkAdvisor.